BYD CO. (002594.SZ/1211.HK): 3Q26 Preview: Sequential improvement with market share gain, policy risks manageable; Buy (CL)

BYD is scheduled to report 3Q26 results on Oct 29. We forecast revenue of Rmb242.9bn (+25% yoy, +25% qoq) and net profit of Rmb11.5bn (+47% yoy, +39% qoq) in 3Q26, mainly driven by higher sales volume of 1,321mn units (+19% yoy, +19% qoq) and higher blended ASP as BYD launched more flash-charging models and improved its domestic NEV retail market share to 25% (vs. 22% in 2Q26). We expect investors to focus on: 1) domestic demand outlook, 2) impact from the EU's hybrid car export cap, 3) impact from the phase-out of VAT rebates for EV exports. The European Commission has confirmed to limit the number of hybrid electric vehicles imported from China to 350k cars a year, effective Dec 1, 2026, for 4 years with the annual limit increasing 6% each year from the second year;